KUCHING: The public are not on board with the proposal of using their Employees Provident Fund (EPF) Account 2 savings as collateral for personal bank loans.
They stated that if such a proposal were to pass, it may lead to some of the lower income group to fall in debt rather than being financially secured.
During the Budget 2023 winding-up speech, Prime Minister Datuk Seri Anwar Ibrahim who is also Finance Minister, stated that he did not agree with allowing another special EPF withdrawal scheme.
Therefore, he proposed a scheme to allow contributors to use their Account 2 savings as collateral for personal bank loans.
He said that such an initiative could help those in desperate need of funds to apply for personal loans.
As such, the New Sarawak Tribune had talked to several locals here to get their opinion on this matter.
NUR SHAFIQAH ASYIKIN HAZUKKI, 25
Researcher
In my opinion, I don’t think it’s a good idea because account 2 is usually used for house payments and education.
Those two are the main debt of the majority of workers in Malaysia besides cars. If it is used as personal loan collateral, it will indirectly be more burdensome for most debtors.
Personal loans for me are not recommended especially for those who still have housing, car or education debt. With added debt, the more commitment that we need to pay.
With wages that are still below the current cost of living, repayment will be increasingly difficult.
Furthermore, savings will decrease and this will lead to the absence of an emergency fund. No one wants to take a personal loan if their salary is commensurate with the cost of living.
MOHD NAZRAN HAN MUSTAPA, 28
Research Assistant
On one hand, the proposed scheme could provide a lifeline for individuals who urgently need access to funds, especially in cases of emergencies or unexpected financial challenges.
However, on the other hand, there are some potential drawbacks to consider. Using EPF savings as collateral for bank loans could potentially put contributors’ retirement funds at risk if they are unable to repay the loan.
This could result in contributors having to dip into their retirement savings earlier than planned, which could have significant long-term implications for their financial well-being in retirement.
Hence, whether or not to support the proposed scheme to use EPF Account 2 savings as collateral for personal bank loans is a complex decision that requires careful consideration of both the potential benefits and risks.
Ultimately, contributors must weigh the short-term benefits of accessing credit against the long-term consequences of potentially putting their retirement savings at risk.
AWG KAMARIE AWG KARIM, 47
Entrepreneur
This proposal may be good in the short run however, in the long run, it will have a big impact on the contributors.
Not only will they be in deeper debt, but they may also have to pay a high interest to the bank. This in turn will leave their financial security at risk.
MUHD HAIZOLNIZAL USINI, 28
Clerk
EPF is the employee’s own savings. Using it as collateral is quite an unwise move.
This is because contributors would not only need to pay interest to the bank, but they may also be financially unstable in the long run.
I believe it is better that such a proposal not be implemented as some of the lower income group may have a hard time to pay back their debt in addition to the interest incurred.
AIDA YASMIN AZHAR, 25
Research Officer
Although I see that such a proposal is good and practical to help those who are desperate for money, in reality, it comes with a caveat.
Those who applied for loans by hook or by crook must have the capacity to pay back the loan on top of interest. If they are not able to, it will surely jeopardise their EPF savings which may lead to financial risk in the long run.
SARAH HAFIZAH CHANDRA, 25
Media Practitioner
I think it is a bad idea because some people may be impulsive and do not think of consequences in the long run when they decide to go for the proposed scheme.
I understand that there are some who may be desperate for money and this proposed scheme may be a saving grace to them, but I do hope that they will weigh out other options instead.
After all, the EPF savings are for rainy days and old days, we must stay disciplined and not disturb funds in those accounts so that we can retire comfortably.
